Author Topic: Checking Priorities Case Study: Is my plan looking OK or should I make changes?  (Read 885 times)

natb2347

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I have a basic plan over the next few years to get me really reaching Mustachian status. 

Thus, far I have:

-renegotiated every bill I possibly could (FU Comcast) (got two recycle bins instead of one - for free - so now we can do biweekly trash pickups instead of weekly...etc.)
-utilized a few great tips from MMM to lower my expenses (lowered our heat from 68 to 66, new shower head - wow so great!!)
-made it a point to try and work from home more often
-started using a CC for all of our expenses for points
-Used my tax returns to FINALLY pay off my school loans and the remaining $3200 towards starting my safety net fund with Betterment (goal - 11K, which should carry me with no frills for 6 months) I estimate that I should be able to reach my goal by the end of the year.
-stopped buying stupid shit I don't need
-working on getting a PT gig at a local restaurant waiting tables or bartending to speed up this whole process.

MY PLAN:
-Starting next year, I plan to start aggressively paying off my car (11K loan at 3.49% - Honda Accord).  I think I can pay it off by June 2018 and will keep it until it dies. 
-Then with the extra funds no longer going to my car and school loan,  I plan to bump up my 401K contributions to 12% (and expect 3% yearly contributions form work).  Any raises I get from now on will go to my 401K. 
-Then I either want to keep upping my 401K and/or get into REIT's since I would suck at landlording.  I will likely at some point make some extra principal payments to the mortgage to get it down a little bit more but it isn't my main focus.

QUESTION: Does this sound like a logical plan?  What else should I be doing? I don't want to pay off my mortgage because I think investing in the market has a better rate of return in the long run.  Plus we may sell at some point and just use it to get another equally priced house (we live in a townhouse now with PMI for the life of the loan and HOA fees every month, forever). 

DETAILS:
I am 37 years old and married.
We are trying for a baby.  Anyone's guess at my age if it will actually happen - but if it does, the above might just blow up in my face.
I have no CC debt. 
I have a $219K mortgage at 3.875 (27 years left on a 30 yr loan)
I make 74K yearly with anywhere from 5-10K in bonuses each year
I contribute 6% to my 401K with no equal match but a 3% safe harbor contribution each year (Fidelity), currently I have just over 15K in there now (Terrible I know!!! Blame my stupid 20's and not discovering MMM until a few months ago)
My husband thinks I am obsessed with all of this lately but he mostly goes along and I manage the money.  Haven't even touched his side of the finances other than our mutual bills but I know he has a 401K with about 24K in it.  He will be debt free by this summer.
I want to retire early but I have very little saved so far and am already getting old :(
HELP!


 


Vindicated

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Good luck with the baby making!  A coworker in her 40s just had her first, so don't get discouraged!

As far as where to put your money, I don't think you need to worry about paying your car down.  3.5% interest isn't bad.  You'll likely do better investing it into a tIRA or Roth.  I'll let the more experienced investors answer specifics on that.

Just to beat them to the punch, Mustachians will need to see the nitty-gritty to make full judgment on how to most efficiently pursue FIRE.  You should go ahead and share your average monthly spending, using the Case Study template.

I think the key is really this:


-stopped buying stupid shit I don't need


That's been my problem in the past too.  Well, I've had other debt problems, but that's the biggest.

natb2347

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Thanks!!
I haven't thought of just not paying off my car and investing that instead. Hmmmm? Food for thought. Thing is I free up those payments once it's paid off to really invest by next year vs paltry little investments now and a stupid car payment. Freedom of a paid off loan wouldn't suck either.


I was wondering about the tIRA. Once I reach 12% contribution to my 401k I was wondering if I should start hoarding funds in a roth IRA in case I'm lucky enough to ever retire early and can withdraw from there before the 401k age. . I read that unless I want to pay 10% and withdraw early from my 401K I need other funds to carry me through until then. That's why I was thinking reits or a tIRA of some sort. I have a hard time imagining maxing those all  out and still having more funds to throw at other taxable accounts though. Problem for a later time when I'm much richer!
 

I was also wondering how much is too much to put in a 401k? I think the max is 18k per year and if I am able to max that, I'm thinking it should be spread around to other things and not all in one type of account? Like 10k in 401k, 5k in a Roth and 3k in reits or something else?

Hotstreak

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I was also wondering how much is too much to put in a 401k? I think the max is 18k per year and if I am able to max that, I'm thinking it should be spread around to other things and not all in one type of account? Like 10k in 401k, 5k in a Roth and 3k in reits or something else?


Something else :).  Check out these two links for a starter:
http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/   
http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/


I think you're off to a great start with cutting expenses and being more aware of your finances.  Next steps would be to build a detailed budget of your current spending, educate yourself deeply on the principals behind early retirement and investing, and get your husband on board.

PDXTabs

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-Starting next year, I plan to start aggressively paying off my car (11K loan at 3.49% - Honda Accord).  I think I can pay it off by June 2018 and will keep it until it dies. 
-Then with the extra funds no longer going to my car and school loan,  I plan to bump up my 401K contributions to 12% (and expect 3% yearly contributions form work).  Any raises I get from now on will go to my 401K. 
We are trying for a baby.  Anyone's guess at my age if it will actually happen - but if it does, the above might just blow up in my face.

I know multiple women who have had kids in their 40s, one of them was my grandmother well before fertility treatment.

I would max out your 401(k) before worrying about a 3.5% car loan. Your 401(k) will probably return more than 3.5%.

You could show this to your husband: https://www.fidelity.com/viewpoints/retirement/how-much-money-do-i-need-to-retire

AlanStache

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3.5% loan is not that bad and upping the investments should beat that. 

When REIT's?  I have one and I love the idea of people directly giving me money but diversified target date funds can be good too.

Other people in other threads have gotten into problems with a S.O. that is not on the same page financially.  I am not one to ask about details there but last thing you want is resentment with his spending or him not being on board.  You are at the start of this and all hyped (great!) but try to see it from his outside perspective. 

Do you pay PMI?  Just wondering as you bought a house with relatively little savings otherwise.

A wise man on here (arebspy) once said that the age someone reaches FIRE at is mainly a function of how old they where when they really got it and there net worth at that time.

There are a lot of people here who have done very well, it is very easy to get down when comparing ones self; dont let that get in your head.  Learn what you can from them but try not to compare yourself to them. 
Be the person Mr. Rogers knows you can be.